The Federal Government announced more than $30 billion in tax cuts for business as part of its 2020 Federal Budget. Two initiatives, an extension of the instant asset write-off and the new ‘Loss Carry Back’ will assist businesses, encouraging them to invest as we emerge from the pandemic.
Clearly, the Government is focused on keeping people in jobs before restarting the economy, with some interesting growth forecasts for next year. As an SME business owner or manager, it is important that you are in a position to take advantage of every single dollar of support available so you can protect your business or take advantage of the opportunities that will present themselves in the coming years. Here are some of the salient points to note from the latest budget:
Instant asset write-off
SME businesses will get a full tax deduction for the cost of any new asset they acquire from now through until 30 June 2022 (or to 30 June 2021 for second-hand assets).- Review and plan your capital expenditure
- If your business sells depreciable assets, or provides services to those businesses (e.g. engineers), engage with your customers.
Loss carry back
SME businesses that make tax losses in FY20, FY21 or FY22, but have paid tax in FY19 or later years, will be able to “carry back” the tax losses and get a refund of the tax paid in the earlier years. Planning around the impact on franking account balances and dividend payments will be critical.- Review your FY20 tax position – is it likely to be a loss?
- The refund can’t be obtained until the FY21 (or FY22) tax return is lodged, so focus on PAYG Instalment variations in the interim.
JobKeeper and JobMaker
The Budget implies that JobKeeper arrangements will cease on 28 March 2021, and the new job support payments for businesses are much less financially generous. Under the new JobMaker system, a subsidy is available for new apprentices, and for hiring new employees aged 16 – 35 who have previously been on JobSeeker or similar benefits.Cashflow forecasts
The Budget is built on the assumption that a COVID-19 vaccine will be available by the end of 2021, that we won’t see more widespread outbreaks, that state boarders (other than WA) will open by Christmas and that business conditions will move from recessionary to growth. COVID-19 support measures will be made more targeted, and much more limited. Many existing payment deferral arrangements are now coming to an end.- Cash flow management over the coming months is going to be critical
- Build a robust cashflow forecast
- Consider how to fund the growth phase of your SME Business, but balance this with managing cash in uncertain economic conditions.
- Plan for the cash flow impact on deferral arrangements (such as tax instalments) and the normalisation of the timing of future payments
Increase in turnover threshold for tax concessions
The increase in the turnover threshold for small business tax concessions is, in some ways, a welcome change that has been sought for years. It now means that most Australian private businesses will qualify for a range of tax concessions that simplify their tax compliance.But don’t expect to see an immediate financial benefit. Most SME businesses will find benefit from only a small number of the concessions, and the benefit is more likely to be a saving in compliance costs rather than a reduction in your tax liability.Mental health aid
The government will provide $7.0 million in 2020-21 to support the mental health and financial wellbeing of small businesses impacted by COVID-19, including:- $4.3 million to provide free, accessible and tailored support for small business owners.
- $2.2 million to expand a free accredited professional development program that builds the mental health literacy of trusted business advisers.
$1.5Bn strategy to prop up manufacturing
$1.5 billion in new funding will be invested over the next four years to make Australian manufacturers more competitive through the economic recovery from COVID-19.
The main element of the $1.5 billion Modern Manufacturing Strategy is the $1.3 billion Modern Manufacturing Initiative, which will support projects within six National Manufacturing Priorities, including resources technology and critical minerals processing; food and beverage; medical products; recycling and clean energy; defence; and, space.
$800m digital plan
$800 million is being invested to push businesses towards adopting digital technologies to grow their business and help the post-COVID economic recovery.
Among the big-ticket items of the government’s Digital Business Plan include $419.9 million towards the full implementation of the Modernising Business Registers (MBR) program, allowing businesses to quickly view, update and maintain their business registry data in one location.
$22.2 million will be spent on helping small-business operators take advantage of digital technologies through an expansion of the Australian Small Business Advisory Service – Digital Solutions program, a Digital Readiness Assessment tool and a Digital Directors training package.